Recent moves by the Chinese government in a protectionist direction are worrying and have uncertain consequences, writes Stanley Crossick, founding chair of the European Policy Centre, in a recent post on Blogactiv.
A joint statement, issued on 26 May (but not posted until 4 June) by nine Chinese ministries and government agencies, gives notice that “[Chinese] government investment projects should purchase domestic products, unless these domestic goods, construction engineering or services are not available in China or cannot be acquired on reasonable commercial terms”.
Crossick describes this is as a worrying development which “could agitate foreign trade relations and encourage protectionism”.
The statement’s protectionist slant is likely to rile other countries, particularly because it comes not long after Beijing created a row over Washington’s ‘Buy American’ provisions, which favoured US contractors for projects funded by its fiscal stimulus, Crossick observes.
The Chinese government’s stance contradicts apparent promises made in February to treat foreign goods fairly with regards to stimulus spending and their calls on other governments to stick by the principle of free trade, Crossick claims, describing China’s attitude as anything but new.
“The Government Procurement Law of the People’s Republic of China has been in place since 2002,” and states that “the government shall procure domestic goods, construction and services” except in a few circumstances, the blogger explains.
“Why then was any new measure necessary?” Crossick asks. Taking note of the government’s claim to be simply implementing existing policy, he nevertheless observes that the timing was probably chosen to coincide with “the huge two-year stimulus package of four trillion yuan (€420 billion)”.
The overseas response has been swift. “Foreign makers of wind turbines have already complained that they have been shut out of bidding on a $5 billion stimulus-financed power project,” Crossick writes, arguing that this policy may ultimately end up hurting Chinese companies, which “have benefited from technology and expertise gained from foreign companies established in China”.
Chinese officials claim their position has been seriously misrepresented, but Crossick believes “what is clear is that, once again, lack of transparency and early explanation fuel foreign suspicion that the measures are protectionist”.
Citing a 17 June statement by the EU’s Chamber of Commerce in China that the Chinese position “sends the wrong signal to the domestic and international business community,” Crossick concludes that, with uncertainty over what will happen in practice, “it is unclear how much effect the new order/directive will have”.